SOUTH AFRICA

Hawke's Bay Tribune, Volume XXIII, Issue 16, 30 December 1932, Page 7

SOUTH AFRICA

FINANCIAL CHAOS SCENES IN CAPETOWN. COMPLETE STAGNATION OF TRADE. (United Press Aesooiation-By CableCopyrigbt.) (Received 30, 11.30 a.m.) Capetown, December 29. Utter chaos prevailed to-day in banking and commercial circles. The Reserve Bank, which fixes the rates, announced this morning that all rates were cancelled, while the Post Office continued to issue money orders at 40 per cent, with a limit of £lOO. Long queues formed at the offices, which were crowded at noon, when a peremptory order was issued confining business to the Union and the Protectorates. Complete stagnation of trade ensued. The crisis is due to the Reserve Bank refusing the commercial banks cover overseas owing to the automatic termination of the purchase of the gold output at the old standard rate. Pending an arrangement for marketing the output being discussed, an unsatisfactory banking position will continue, Mr Roos declared emphatically today: “If General Smuts continues to put party before country, the present Government will continue. ’ ’

REMOVAL OF IMPEDIMENTS. (Received 30, 12.30 p.m.) (Rugby, December 20. “The Times,” commenting on die South African currency position, says there can be little doubt that the Government’s change of policy will benefit South Africa, removing the grievous impediment to overseas tade and to intercourse with her northern neighbours, thus enabling the farmers to reap at least the advantages of the concessions which Mr Havenga obtained at Ottawa. Much, of course, depends on the nature of the new policy—whether the rate of exchange is to be allowed to find its own level or whether South African currency is to be linked again to gold though at a lower rate. It is this second altenative which at the moment seems to be more probable, but the position may be affected by the development of the political situation, which is still quite obscure. LEGAL POSITION. The “Manchester Guardian’s” financial editor says: “The legal position i* much the same as that in England in September, 1931, for in one sense it was not the gold standard which was suspended in Britain last year, but only the gold convertibility of Bank of England notes. The South African Government’s intentions about the future of currency are not clear, but nothing has been said yet to indicate that the South Afican pound will be devalued. On the contrary, such steps as have been taken suggest that the primary objective of the Government, at least for the time being, is to prevent depreciation of the currency resulting from the flight of capital, for which, fundamentally, there is little economic justification.' It does not follow that by suspending the gold convertibility of the note issue South Africa will depreciate her currency. ’’ Following to-day’s development in the South African financial situation, the interest which was aroused in financial circles in London continues, and events are being watched closely. Although no change was made in the nominal rates of exchange between South Africa and London yesterday, business was confined to very small transactions. At the close of the Stock Exchange tonight, South African mining shares remained on the weak side, awaiting further news regarding the exchange position.